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HQ 556878


March 18, 1993

CLA-2 CO:R:C:V 556878 BLS

CATEGORY: CLASSIFICATION

TARIFF NO: 9802.00.80

District Director of Customs
P.O. Box 670
Nogales, Arizona 85621

RE: Application for Further Review of Protest No. 2604-91- 100032; steel insert for battery cable; assembly; lead encapsulation; 19 CFR 10.14(a), 10.16(a), Sigma; C.J. Tower; HRL 555580

Dear Sir:

This is in reference to Protest No. 2604-91-100032, filed by William F. Joffrey, Inc., on behalf of Prestolite Wire Co., ("Prestolite") concerning the applicability of subheading 9802.00.80, Harmonized Tariff Schedule of the United States (HTSUS), to steel inserts used in the assembly of a battery cable. A sample of the product has been submitted.

FACTS:

Steel inserts of U.S. origin formed in a "C" shape with preset holes on each end are exported to Mexico. In Mexico, the inserts are placed on a diecast mold with a wire cable, which may be of U.S. or foreign origin. Liquid lead of U.S. origin is pressure fed into the mold, encapsulating the insert and the cable. After cooling, a nut and bolt are inserted through the holes, to permit the completed battery cable to be secured to the battery terminal.

ISSUE:

Whether the steel insert qualifies for the partial duty exemption under subheading 9802.00.80, HTSUS.
y

LAW AND ANALYSIS:

Subheading 9802.00.80, HTSUS, provides a partial duty exemption for:

(a)rticles assembled abroad in whole or in part of fabricated components, the product of the United States, which (a) were exported in condition ready for assembly without further fabrication, (b) have not lost their physical identity in such articles by change in form, shape, or otherwise, and (c) have not been advanced in value or improved in condition abroad except by being assembled and except by operations incidental to the assembly process, such as cleaning, lubricating, and painting.

All three requirements of subheading 9802.00.80, HTSUS, must be satisfied before a component may receive a duty allowance. An article entered under this tariff provision is subject to duty upon the full cost or value of the imported assembled article, less the cost or value of the U.S. components assembled therein, upon compliance with the documentary requirements of section 10.24, Customs Regulations (19 CFR 10.24).

Section 10.14(a), Customs Regulations (19 CFR 10.14(a)), states in part that:

[t]he components must be in condition ready for assembly without further fabrication at the time of their exportation from the United States to qualify for the exemption. Components will not lose their entitlement to the exemption by being subjected to operations incidental to the assembly either before, during, or after their assembly with other components.

Section 10.16(a), Customs Regulations (19 CFR 10.16(a)), provides that the assembly operation performed abroad may consist of any method used to join or fit together solid components, such as welding, soldering, riveting, force fitting, gluing, laminating, sewing, or the use of fasteners. The mixing of liquids, gases, chemicals, food ingredients, and amorphous solids with each other or with solid components is not regarded as an assembly.

The initial question which must be addressed, therefore, is whether the above-described operation, in which the wire cable and steel insert do not physically meet but are permanently united by the encapsulation process, constitutes an acceptable assembly operation within the meaning of 19 CFR 10.16(a), when the statute contemplates the joinder of solids only.

In C.J. Tower & Sons, Inc. v. United States, 62 Cust. Ct. 643, C.D. 3840, 304 F. Supp. 1187 (1969), polyethylene sheeting in a molten state was joined to U.S. polyester sheeting. At the completion of the operation, the polyethylene had solidified. The court held that there was a joinder of two solids and an assembly under item 807.00, Tariff Schedules of the United States, (TSUS), the precursor to subheading 9802.00.80, HTSUS, even though the polyethylene was initially in a molten state, since this material was a solid at the completion of the process.

In Sigma Instruments v. United States, 5 C.I.T. 90, 565 F. Supp. 1036 (1983), aff'd, 724 F.2d 930 (1984), U.S. terminal pins were incoporated into header assemblies by a transfer molding operation in Mexico. A molding compound, exported to Mexico in rope form was heated and transformed into a viscous state before being joined to the terminal pins. At the completion of the transfer molding operation, the molding compound had substantially assumed a definitive solidification, size, and shape. Through this process the terminal pins became permanently fixed in their designed configuration and spacing so that they could perform their intended function as electrical relays.

The court rejected the Government's arguments that the transfer molding operation in Mexico represented a further fabrication rather than an assembly, and that the terminals were substantially transformed into new and different articles of commerce by the molding process. Relying on C.J. Tower, the court found that the transfer molding process consisted of both manufacturing and assembly operations, that upon completion of the process there was a joinder of solids, and that the operation constituted a permissible assembly within the purview of item 807.00, TSUS. Accordingly, an allowance in duty was permitted for the U. S. terminal pins. (See, also HRL 555580, dated April 2, 1990, involving the assembly of a metal cylinder and concrete.)

The rules enunciated in Sigma and C.J. Tower are applicable to the process involved in the instant case. Thus, the lead is in a molten state upon initial contact with the steel insert and cable, but it becomes a solid upon completion of the assembly process. The result of the operation, which also includes a manufacturing process (of the encapsulating lead), is a permanent joinder of the lead, steel insert, and cable, although the insert and cable are never in physical contact with one another. Following the principles set forth in the above-cited cases, there is an assembly of the steel insert to the other two components.

Accordingly, we find that the foreign operations do not result in a further fabrication of the steel insert, but rather constitute an acceptable assembly operation within the purview of subheading

9802.00.80, HTSUS. However, no allowance in duty may be made under this tariff provision for the cost or value of the U.S. origin lead as the heating of the lead to a molten state and hardening it into a shape encapsulating the steel insert and cable constitute a further fabrication of the lead. The lead also loses its physical identity in the article by change in form and shape, contrary to clause (b) of the statute.

HOLDING:

A U.S. steel insert, joined to a wire cable through a process of encapsulation by molten lead, is considered assembled to the cable for purposes of the partial duty exemption under subheading 9802.00.80, HTSUS. Accordingly, the steel insert is eligible for the duty allowance under subheading 9802.00.80, HTSUS. The protest should be granted consistent with this decision. A copy of this decision should be attached to the Form 19, Notice of Action, to be sent to the protestant.

Sincerely,

John Durant, Director

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